Friday, June 29, 2012

A Day-After Look at Supreme Court Ruling on Affordable Healthcare Act

So here is what happened, in case you missed it –

The individual mandate was upheld. The provision penalizing states that refuse to expand Medicaid was invalidated, leaving the federal incentive to states that do agree to expand Medicaid in place. All other provisions, such as requirements that insurers cover individuals with pre-existing conditions and that employers with over 50 employees offer health insurance coverage, are left in place as well.

The individual mandate was upheld, not under Commerce clause, but under Congress’s taxing powers. Five justices (Chief Justice Roberts plus the 4 more conservative justices) would have struck the mandate under the Commerce clause.

But what counts is that 5 justices (the Chief plus the 4 more liberal justices) upheld the mandate as a permissible tax: individuals have the choice – get coverage or pay the tax. Individuals are therefore subject to a new tax for lack of coverage.

As to choosing to rule the mandate as a tax rather than a mandate or penalty: “[T]he rule is settled that as between two possible interpretations of a statute, by one of which it would be unconstitutional and by the other valid, our plain duty is to adopt that which will save the Act.”

Chief Justice Roberts wrote:

Under the mandate, if an individual does not maintain health insurance, the only consequence is that he must make an additional payment to the IRS when he pays his taxes. … That, according to the Government, means the mandate can be regarded as establishing a condition—not owning health insurance—that triggers a tax—the required payment to the IRS. Under that theory, the mandate is not a legal command to buy insurance. Rather, it makes going without insurance just another thing the Government taxes, like buying gasoline or earn-ing income. And if the mandate is in effect just a tax hike on certain taxpayers who do not have health insurance, it may be within Congress’s constitutional power to tax.

As to the law’s provision to get states to expand Medicaid coverage, the Court ruled (the Chief and 6 others agreeing) that Congress can’t take away existing federal funding as a way to penalize states that do not agree to expand Medicaid, but Congress can (as the law also does) offer additional federal funds as incentive to states who agree to expand coverage.

In a three part analysis, the Chief wrote that Congress does not have the authority to require states to regulate; however it can establish “cooperative” spending programs with states, i.e., Medicaid

He said:

Nothing in our opinion precludes Congress from offering funds under the Affordable Care Act to expand the availa¬bility of health care, and requiring that States accepting such funds comply with the conditions on their use. What Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding.

Here is the Court's short version on the Medicaid provision:

The threatened loss of over 10 percent of a State’s overall budget is economic dragooning that leaves the States with no real option but to acquiesce in the Medicaid expansion. The Government claims that the expansion is properly viewed as only a modification of the existing program, and that this modification is permissible… But the expansion accomplishes a shift in kind, not merely degree. The original program was designed to cover medical services for particular categories of vulnerable individuals. Under the Affordable Care Act, Medicaid is transformed into a program to meet the health care needs of the entire nonelderly population with income below 133 percent of the poverty level. A State could hardly anticipate that Congress’s reservation of the right to “alter” or “amend” the Medicaid program included the power to transform it so dramatically. The Medicaid expansion thus violates the Constitution by threatening States with the loss of their existing Medicaid funding if they decline to comply with the expansion.

The Chief lays out the choices now before the states –

The Court today limits the financial pres¬sure the Secretary may apply to induce States to accept the terms of the Medicaid expansion. As a practical mat¬ter, that means States may now choose to reject the ex¬pansion; that is the whole point. But that does not mean all or even any will. Some States may indeed decline to participate, either because they are unsure they will be able to afford their share of the new funding obligations, or because they are unwilling to commit the administra¬tive resources necessary to support the expansion. Other States, however, may voluntarily sign up, finding the idea of expanding Medicaid coverage attractive, particularly given the level of federal funding the Act offers at the outset.

Here is how Jordan Rau and Julie Appleby writing for Kaiser Health News reported it:

The U.S. Supreme Court Thursday upheld nearly all of the landmark federal health law, affirming its requirement that most everyone carry insurance, but complicating the government’s plan to extend coverage to the poorest Americans.

Chief Justice John Roberts Jr. joined the court's four liberals in upholding the mandate, the best-known and least popular part of the law. The court also upheld hundreds of other rules embedded in the law designed to help millions more Americans obtain insurance and to refashion the health care industry.

But a majority of the justices voted that the government could not compel states to expand Medicaid, the federal and state program for the poor, by threatening to withhold federal money to existing Medicaid programs.

That change creates unexpected challenges for the Obama administration's plan to extend insurance to 30 million more Americans. More than half of those—mostly childless adults in poverty or slightly above it -- were to be covered by expanding Medicaid, but now states can opt out.

Find Kaiser Health News reporting here:

On the mandate –

Kaiser Health News reported:

Creating an unusual majority coalition, Roberts joined the four liberals on the court in upholding the mandate, which had been viewed as the most legally tenuous part of the law. Roberts concluded the penalty for not carrying insurance fell within Congress' taxing power, even though the court’s liberal wing had justified the mandate as a reasonable regulation of interstate commerce.

Under the mandate, people who refuse to buy insurance will face a tax penalty. By the year 2016, that will amount to either $695 a year or 2.5 percent of income, whichever is greater. Roberts wrote that while the penalties were "plainly designed to ex¬pand health insurance coverage… taxes that seek to influence conduct are nothing new."

The decision leaves intact other major parts of the law that require insurers to accept all customers regardless of their health status and provide tax credits to those who need help to buy coverage. Those provisions go into effect in 2014.

The ruling eliminates one of the main justifications states have used to delay setting up new, online insurance markets called exchanges, where small businesses and individuals can shop for coverage.

While 14 states and the District of Columbia have authorized creation of these exchanges, another 33 have taken only initial steps or none at all, and three states have declared they won’t do it at all. The law requires the federal government to run the exchanges if state officials are unwilling or unable to do so.

Congressional Quarterly reported:

The majority agreed that the law does not pass muster under the Commerce Clause. But the justices noted that failure to have health insurance is not made a crime. The majority found the mandate and the penalty fee constitutional under Congress’ power to levy taxes. The penalty would be collected by the IRS through individual tax returns.

“The federal government does not have the power to order people to buy health insurance,” Roberts wrote for the majority. “Section 5000A would therefore be unconstitutional if read as a command. The federal government does have the power to impose a tax on those without health insurance. Section 5000A is therefore constitutional because it can reasonably be read as a tax.”

On expansion of Medicaid –

Kaiser Health News reported:

The court's ruling on Medicaid took away one of the federal government's primary inducements to get states to participate in its expanded health coverage for the very poor. The law would have allowed the government to withhold all Medicaid money to states that didn’t go along with its expansion to cover people who earned up to 133 percent of the federal poverty level, or about $31,000 for a family of four.

Today, about 60 million people are enrolled in the program, mostly children, pregnant women and the elderly, and the expansion would have added another 17 million. Roberts said that Congress had not revised an existing program, but essentially created a whole new one, and therefore was not entitled to yank longstanding funding for states that wouldn’t go along with the changes.

"The financial 'inducement' Congress has chosen is much more than ‘relatively mild encourage-ment'—it is a gun to the head," Roberts wrote. "The threatened loss of over 10 percent of a State’s overall budget … is economic dragooning that leaves the States with no real option but to acquiesce in the Medicaid expansion."

The law calls for the federal government to pick up all the costs of the Medicaid expansion from 2014 to 2016. After that, states would gradually start having to pay a portion, but the federal government’s share would not fall below 90 percent.

Congressional Quarterly reported:

The states — which filed suit immediately after the law was enacted — challenged as unduly coercive the expansion of the state-federal Medicaid program to adults younger than 65 who have not previously been eligible.

Roberts agreed, writing in the 7-2 majority on the Medicaid question that it would be “economic dragooning” to penalize states that do not participate in the expansion by taking away their existing Medicaid funding, which makes up a significant portion of state budgets. “A state could hardly anticipate that Congress’ reservation of the right to ‘alter’ or ‘amend’ the Medicaid program included the power to transform it so dramatically,” Roberts wrote.

But the chief justice also wrote that the problem could be “fully remedied” by barring the Department of Health and Human Services from taking away Medicaid funding.

And what of other parts of the law (after all, the legislation was over 1,000 pages) –

The decision leaves intact other major parts of the law that require insurers to accept all customers regardless of their health status and provide tax credits to those who need help to buy coverage. Those provisions go into effect in 2014.

As reported Jane Norman of Congressional Quarterly, who also offered an early and succinct analysis of the Supreme Court Decision that upheld the health care law:

The decision also means the law’s complex framework remains intact. Employers with 50 workers or more will be required to provide health insurance or pay penalties. Insurers will be unable to discriminate against sick people. Subsidies to help pay for insurance will be extended to people earning up to 400 percent of the federal poverty level. Insurance companies will be forced to meet standards for how much money they spend on health care as opposed to administrative costs. Young adults up to age 26 will be able to remain on their parents’ health insurance policies. And the Medicare prescription drug coverage gap known as the doughnut hole will eventually disappear.

For a copy of the Court’s opinion, go here:

For an interactive version posted by NPR, go here:

And check out a resource page posted by Kaiser Health News here:

More later from NAHAM News.

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